Air Canada 2010 Annual Report Download - page 94

2010 Air Canada Annual Report
94
The following table outlines expenses and pass-through costs under the Jazz CPA for 2009 and 2010:
2010 2009
Expenses from Jazz CPA $ 934 $ 973
Pass-through fuel expense from Jazz CPA 292 253
Pass-through airport expense from Jazz CPA 193 196
Pass-through other expense from Jazz CPA 39 35
$ 1,458 $ 1,457
Due to terms of the Jazz CPA, Jazz is deemed to be a variable interest entity. Notwithstanding that Air Canada is not the
primary beneficiary of Jazz, Air Canada holds a significant variable interest in Jazz through the contractual arrangements
with Jazz as described in Note 14.
The Corporation entered into an agreement amending the terms of the Jazz CPA effective August 1, 2009. This amending
agreement includes among other items (i) a reduction to fees paid under the Jazz CPA based on a reduction in the mark-
up paid to Jazz from 16.72% to 12.5%; (ii) a reduction in Air Canada’s commitment to Jazz’s covered fleet from 133 to
125 aircraft; (iii) a contract term extension of five years (from December 31, 2015 to December 31, 2020), during which a
second benchmarking review will be performed; and (iv) agreement on Jazz’s turboprop fleet renewal strategy relating to
the introduction of 15 Dash-8-400 aircraft which will replace 13 CRJ-100 aircraft.
E) AEROPLAN LOYALTY PROGRAM
Air Canada is an Aeroplan partner providing certain of Air Canada’s customers with Aeroplan Miles®, which can be redeemed
by customers for air travel or other rewards acquired by Aeroplan.
Under the CPSA, Aeroplan purchases passenger tickets from Air Canada to meet its obligation for the redemption of
Aeroplan Miles® for air travel. The proceeds from the sale of passenger tickets to Aeroplan are included in Advance ticket
sales. Revenue related to these passenger tickets is recorded in passenger revenues when transportation is provided.
For Aeroplan Miles® earned by Air Canada customers, Air Canada purchases Aeroplan Miles® from Aeroplan in accordance
with the terms of the CPSA. The cost of purchasing Aeroplan Miles® from Aeroplan is accounted for as a sales incentive and
charged against passenger revenues when the points are issued, which occurs upon the qualifying air travel being provided
to the customer.
F) OTHER REVENUES
Other revenue includes revenues from the sale of the ground portion of vacation packages, ground handling services and other
airline related services. Vacation package revenue is recognized as services are provided over the period of the vacation. Other
airline related service revenues are recognized as the products are sold to passengers or the services are provided.
Other revenue also includes revenue related to the lease or sublease of aircraft to third parties. Lease or sublease revenues are
recognized on a straight line basis over the term of the lease or sublease. Rental revenue from operating leases and subleases
amounted to $101 in 2010 (2009 - $126).
In certain subleases of aircraft to Jazz, the Corporation reports the sublease revenues net against aircraft rent expense as
the terms of the sublease match the terms of the Corporation’s lease. The Corporation acts as lessee and sublessor in these
matters. Refer to Note 14 for the lease commitments under these arrangements.
The Corporation provides certain services to former related parties consisting principally of administrative services in relation
to information technology, human resources, finance and accounting, treasury and tax services, corporate real estate, and
environmental affairs. Administrative service revenues are recognized as services are provided. Real estate rental revenues are
recognized on a straight line basis over the term of the lease.